When people buy life insurance, they generally buy whatever their insurance agent sells them blindly instead of understanding what’s best for them. Most people remain unaware of financial investment and insurance throughout their life, often depending on brokers and agents to help them wade the murky waters of buying life insurance.
However, agents and brokers work primarily on a commission basis, which means that they are incentivized to sell to customers. The larger the sum insured, the larger is the premium and accordingly, their commission. As a result, their advice might not always be in your best interest.
We often get to hear stories of how so-called ‘top life insurance agents’ misguided customers with false claims to invest in a policy which suits neither the customer’s requirements nor their risk appetite. So, how do you avoid taken in by a glib life insurance broker?
Here’s what we think might help you make better life insurance decisions.
Buy Best Life Insurance Plans
Customers make their insurance decisions primarily based on the advice of their agents. The fine print and technical jargon in a policy brochure often seem far too challenging for a layman and they end up being dependent on a third-party.
As a result, before you buy your insurance, it’s best you understand why you need insurance, what kind of sum insured you’d want to buy, and the factors that can help you decide the best insurance provider. Finally, you can compare the offerings from various insurance providers online to zero in on a policy that suits you best.
1) What kind of life insurance do you need?
Life insurance can serve a wide range of purposes. Policies today can offer risk coverage on your life by providing surviving members with a death benefit, and even help you plan for your child’s education or your own retirement, in addition to providing a cover.
Depending on the range of features you opt for and a variety of other factors such as age, lifestyle, and coverage period/term, the insurance premium will vary. The objective should always be to understand your needs first.
2) What should your sum insured be?
Once you know which kind of life insurance you need, it’s time to understand the minimum sum insured that you will require. You can do that by calculating the minimum monthly income needed in order to keep up your current standard of living.
This amount is critical for death benefit policies like term insurance since it provides compensation to surviving members in case of death to the main earner in the family. Alternatively, you could also opt for money-back policies which provide a lower sum insured but offer savings for the long run by offering returns at regular intervals.
3) Which factors to consider when choosing your insurance provider?
The above-mentioned points are the basis for insurance decision-making. Once that’s done, you can then opt for more advanced criteria and specific features (terminal illness benefit, 30-day refund, tax deductions, etc.) depending on your choice. While these features offer complimentary benefit, they should not be used as a primary factor to decide on your insurance provider.
Most people tend to forgo one crucial piece of information when deciding on their insurance provider, which is the claim settlement ratio. This metric offers the percentage of claims that were settled (accepted) by the provider out of those that were submitted by the customers.
The higher the claim settlement ratio, the higher is the tendency of the life insurance provider to accept your claim and offer you a smooth and hassle-free settlement, while a lower ratio indicates the possibility of a stricter verification process which can lead to rejection of your claim.
Most brokers do not provide this information to their customers since it might clash with their best interest in terms of commissions.
Another small but equally crucial piece of information is the age of coverage. This represents the age till which providers will offer life coverage to a customer. The higher the number, the better. Since it means that even if you die of old age, your survivors will still be compensated.
Compare Life Insurance Online
Now that you have the main info needed to weed out the policies which suit you best, it’s time to compare the life insurance quotes online. While physically comparing brochures can be tedious, comparing the best life insurance quotes online can be a great time-saver and help you make the best decision for yourself.
For example, a site like Coverfox.com will only require minimum details to start showing you insurance quotes from the top providers. If you can offer more information, based on your preference, it can help you narrow down further to only those insurance providers which are best suited for you.
So, the next time you need insurance, put in your requirements to compare quotes online instead of soliciting advice from your local agent.